I had an interesting conversation today with someone contemplating buying a business – either an independent company or buying into a franchise system.
Several times before I have advised friends on the question of franchise vs. independent company. How to decide?
More creative and inventive? Gotta seek new and better ways of doing things? Stifled by routine? These traits point towards an independent business. If successful and scalable, the upside is virtually unlimited.
Want to do something that’s proven to work? Able to enthusiastically apply someone else’s recipe? Look at a franchise. Besides, the due diligence is much easier, you can talk to existing franchisees about their performance, the franchise offering circular is a regulated disclosure document, and a lot of the risk has been removed long before you showed up.
One of the biggest obstacles to franchisee status is ego. “But I’ll be at the mercy of the franchisor!” you protest. “I want to BE the franchisor.” That may be true, but so is this… the bankruptcy courts are littered with franshisor wannabees who never got there.
I’m a big fan of both models. Business ownership is the great American path to real wealth creation. The key is alignment with your personality and style, and finding the right company or franchise where you can mitigate the risk and maximize the rewards.
— David Bass
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